How to innovate (and how not to), part 4: Fail fast, act small, embrace big

Where does innovation come from? And which method works best? Jihee Junn continues her look at the many and varied approaches to innovation in the fourth part of a series.

Trial and error could be seen as a slightly less romantic form of ‘fail fast’, a favourite, perhaps clichéd and potentially irresponsible phrase favoured by innovators around the world.

In the startup environment, there is an appreciation of failure and an understanding of the need to evolve if the business doesn’t suit the consumer. And the most innovative companies need to be willing to have a few things crash and burn.

“We haven’t failed enough yet,” says Rod Snodgrass, a man with a long history in the telco realm, departing chief executive of Spark Ventures and a self-proclaimed “screwdriver in the power socket kind of guy”. “If you’re not scared shitless, you’re probably not going fast enough. And if you’re not failing, you’re not doing enough, fast enough. Fail fast and fail cheap. Failure is a learning process.”

In an era where consumers have much more choice, it often pays to be fast. The size of a business used to be closely correlated with profitability. But, according to Boston Consulting Group, the likelihood of an industry’s revenue leader also having the highest margins declined from 31 percent in 1979 to six percent in 2011. Big companies are being nibbled at from all angles (although, while the conventional wisdom is that we’re in an era of disruption, big companies are also protecting their positions through mega-mergers, consolidation and acquisitions). Increasingly, those big companies are seeing the need to become more entrepreneurial. But, as Snodgrass says, due to legacy issues, a big company trying to be more entrepreneurial is like a fat kid on a diet, whereas a startup is more like a skinny kid doing weights.

Also, in the past, companies didn’t need to move as fast because the future was more predictable. “It was basically an incremental extension of today, but there’s so much disruption happening you need to move quite quickly.”

Russell Jones, ASB’s head of technology and innovation, says the company has also had to speed up its innovation processes and change the culture to keep pace, something he puts down to the 'agile and lean' approaches to business (others like BNZ also embrace these principles and YouMoney, which was launched as a minimum viable product and then steadily improved based on customer feedback, is a good example of low-risk innovation).

But speed is not the only thing that greases the wheels of innovation, particularly in a sector like finance with so many big, thorny, connected issues like payments. Scale can be helpful, and while big companies have plenty of legacy issues to deal with, they also have access to huge amounts of customer data that can be translated into insights—as well as the funds required to help bring them to life.

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